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Suncor Energy Q4 Earnings Miss as Production, Pricing Fall - Analyst Blog

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Canada's biggest energy firm and the largest oil sands outfit, Suncor Energy Inc. ( SU ) reported fourth-quarter 2014 operating earnings per share of 27 Canadian cents (24 U.S. cents). The earnings reported were not only substantially below the Zacks Consensus Estimate of 45 U.S. cents but also were lower than the year-ago quarter level of 66 Canadian cents. Lower production levels and weak crude pricing environment hampered the results.

In the reported quarter, total revenue was C$9.09 billion (US$8 billion) compared with $10.19 billion in the year-ago quarter. The top line also failed to meet the Zacks Consensus Estimate of US$9.9 billion.

Quarterly operating earnings of C$386 million were significantly lower than C$973 million recorded a year ago. Moreover, cash flow from operations decreased to C$1.5 billion from C$2.4 billion in the fourth quarter of 2013.

For full-year 2014, operating earnings was C$3.15 (US$2.77) per share, up from C$3.13 per share reported in 2013. However, operating earnings fell short of the Zacks Consensus Estimate of US$2.83.

Revenues of C$40.5 (US$35.7) billion for the full year were higher than C$40.3 billion in 2013 and also ahead of the Zacks Consensus Estimate of $35 billion.

Production

Total upstream production in the reported quarter averaged 557,600 barrels of oil equivalent per day (BOE/d), marginally lower than the fourth-quarter 2013 level of 558,100 BOE/d. Higher maintenance activities in the Oil Sands segment were partially offset by increased contribution from the Exploration and Production segment.

Oil sands volume was 384,200 barrels per day (Bbl/d), lower than 409,600 Bbl/d recorded in the year-ago quarter. Unplanned maintenance activities hampered the volume.

Production from Syncrude operations decreased about 5% year over year to 35,100 Bbl/d in the quarter as a result of unplanned maintenance activities.

Suncor's Exploration and Production segment (consisting of International and Offshore and Natural Gas segments) produced 138,300 BOE/d, higher than 111,600 BOE/d in the prior-year quarter. Contribution from Libya and increased production at Terra Nova aided the result.

The Refining and Marketing segment averaged 440,800 Bbls/d of refinery crude processed, up from 419,000 Bbls/d in the year-ago quarter. The refinery utilization came in at 95%, higher than the year-ago quarter level of 91%.

Product Sales

The company's refined product sales of 548,200 Bbls/d increased 3.8% from the prior-year quarter.

Operating Expenses

Suncor reported operating cost of C$2.3 billion compared with C$2.5 billion in the year-ago quarter.

Balance Sheet & Capital Expenditure

As of Dec 31, 2014, Suncor had cash and cash equivalents of C$5.5 billion and total long-term debt (including current portions) of C$12.5 billion. The debt-to-capitalization ratio was approximately 23%. Moreover, the company incurred capital expenditure of C$1.9 billion in the quarter.

2015 Guidance

Suncor lowered 2015 capital spending projection by C$1 billion to C$6.2-C$6.8 billion to deal with low crude pricing.

The company also plans to reduce operating expenses by C$600-C$800 million over the next two years.

Zacks Rank

Suncor currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked players from the broader energy sector include InterOil Corporation ( IOC ), Golar LNG Partners LP ( GMLP ) and World Fuel Services Corp. ( INT ). Each of these stocks sports a Zacks Rank #1 (Strong Buy).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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